(Bloomberg) — Bitcoin tumbled as concerns over the possibility of higher interest rates weighed on risk sentiment, prompting investors to pull back from digital assets.
The largest cryptocurrency fell as much as 2.9% to $63,018, its lowest level in 11 days. Second-largest token Ether was down as much as 4.1%. Bitcoin later pared some of its losses and was down 2.5% at around 6:10 a.m. in New York.
Citadel Securities expects the US Federal Reserve to raise rates by a quarter percentage point on Wednesday, a surprise move that it said would strengthen Chairman Kevin Warsh’s credibility in the battle with inflation. Traders see a roughly one-in-three chance of a rate hike. Rising borrowing costs tend to drive investors away from risk assets such as cryptocurrencies.
“Bitcoin is mainly getting hit by the rising probability of a Fed hike, as well as macro concerns about AI-related credit risks,” said Caroline Mauron, co-founder Orbit Markets. “The next level to watch on the downside is $62,000, with strong support expected around $60,000.”
Bitcoin has been making modest gains over the past month amid hopes it has found a floor after crashing around 50% from a record $126,000 in October. But heavy outflows from US-listed Bitcoin exchange-traded funds late last week underscore the fragility of its recent recovery. The ETFs saw the third consecutive day of outflows, with investors pulling out $11.6 million from the funds on Monday bringing the total withdrawn from Thursday to $476.9 million.
Rate-hike concerns are overshadowing recent momentum behind the Clarity Act, a long-awaited US cryptocurrency market-structure bill.
“We are currently holding a neutral bias on Bitcoin,” said Tony Sycamore, an analyst at IG Australia. “A sustained break and close above the 200-day moving average (currently at $72,001) is still needed to negate medium-term downside risks, bring a buzz back to Bitcoin and to allow a more constructive technical picture to emerge.”
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